Potash Corporation of Saskatchewan Inc.

Potash Corporation of Saskatchewan Inc.

Business History

Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer and related industrial and feed products company. The Company owns and operates five potash mines in Saskatchewan and one in New Brunswick. It also holds mineral rights to the Esterhazy mine where potash is produced under a mining and processing agreement with a third party. Its phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers; animal feed supplements and industrial acid, which is used in food products and industrial processes. It has a phosphate mine and two mineral processing plant complexes in northern Florida and six phosphates feed plants in the United States. Its nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. It has nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad.

History – The Potash Corporation of Saskatchewan Inc. was a crown corporation of the Government of Saskatchewan until the IPO on November 2, 1989.  PCS has acquired numerous interests in Canada, the United States, Israel, Chile, and the Middle East.  PCS has undertaken numerous expansion projects at its various facilities to increase production capacity in response to the steadily increasing demand for fertilizers and industrial products.

Management

William J. Doyle	President, Chief Executive Officer, Non-Independent Director
Wayne R. Brownlee	Chief Financial Officer, Executive Vice President, Treasurer
Stephen Francis Dowdle	President – PCS Sales
Brent E. Heimann	President – PCS Phosphate and PCS Nitrogen
Garth William Moore	President – PCS Potash
G. David Delaney	Chief Operating Officer, Executive Vice President
Joseph A. Podwika	Senior Vice President, General Counsel, Secretary
Robert A. Jaspar	Senior Vice President – Information Technology
Lee M. Knafelc	Vice President – Administration and Human Resources

Production

Main products –PCS’s main products are the three primary crop nutrients: potash (K), phosphate (P) and nitrogen (N).  PCS is responsible for approximately 20 percent of global capacity.

Main Markets – PCS’s key global markets are China, India, other parts of Asia, Latin America, and North America.

Supply and Demand of Potash

World demand for potash fertilizers is projected to increase at an annual average rate of about 2.7 percent (below), equivalent to an increment of 3.5 million tonnes per year.

Regional and subregional contribution to change in world potash consumption 2008–2012

Potash

The global capacity of potash was reviewed in detail by the International Fertilizer Association (IFA) in 2007. The review resulted in revised effective capacities and up-to-date operating-rate adjustments. World potash capacity is set to increase by almost 9 million tonnes K₂O in the period 2008–2012 – a growth of more than 20 percent. The world’s average operating rate is estimated at about 87 percent. Major expansions are scheduled in Russia, Argentina and Canada towards the end of the projection period. Other producers in Belarus, Jordan, Israel, and United States of America are expected to expand capacity more gradually.

            With prices for the nutrients produced by PCS set by commodity exchanges it is important to ensure that demand and supply are closely matched to ensure maximum revenues.  The following table shows how closely supply follows demand, demonstrating the ease with which production can be increased.  PCS operates under a low cost of production for its agricultural nutrients, allowing it to realize economic profits for its high demand products.

World N, P₂O₅, K₂O nutrient supply and demand, 2008–2012

		2008	2009	2010	2011	2012
		(thousand tonnes)
Total supply		202 637	210 993	219 282	228 209	239 823
Total demand		198 860	204 879	210 567	216 432	222 037
Potential balance		3 777	6 114	8 716	11 778	17 786
Potential balance as % of projected demand		1.9	3.0	4.1	5.4	8.0

Stages of Production – The potash ore is mined from underground; the ore is crushed and then scrubbed and deslimed of insoluble components by flotation in a water solution.  Course and fine media are conditioned separately.  Potash is separated by flotation in a brine solution.  The final product is separated from the brine solution by centrifugation and drying, resulting in standard and fine grades.  A compaction plant must be used to produce coarse and granular sizes.

Overview of Productivity –

Pricing for main products – Market controlled and spot contracts with purchasers.

Significant fixed and variable costs – Fixed costs include labour (mining and processing), .  Variable costs include transportation.

Company profits and profit margins – PCS has realized an operating profit margin of approximately 50% with a net profit margin of 35% on revenues of $6.5 billion

Competition

Strongest Competitors – Agrium Inc., Mosaic Co., Intrepid Potash Inc., Compass Minerals Intl., K+S AG

Competitive Advantage – Controls approximately 20% of global potash production; large economies of scale and efficient production techniques.

Summary

            The Potash Corporation is the leader in the fertilizer oligopoly due to their possession of mineral rights to approximately 20% of the global potash reserves.  Despite PCS’s near monopolistic position in the fertilizer industry in Saskatchewan, it is still reliant on market demand for their product and the prices obtainable through global commodity markets and spot price contracts with major customers.  However, the ever increasing demand for food worldwide will continue to increase demand for their products, which will keep market prices high enough to ensure healthy economic profits for years to come.

Sources

Corporate information

http://www.google.ca/finance?q=TSE%3APOT

Official Home Page

http://www.potashcorp.com/

Current & Future Potash Outlook

http://www.ipipotash.org/udocs/Current_World_Potash_Situation_and_Future_Outlook_paper.pdf

Current world fertilizer outlook

ftp://ftp.fao.org/agl/agll/docs/cwfto11.pdf

Potash Processing in Saskatchewan

http://technology.infomine.com/hydrometmine/papers/Potash%20Processing%20in%20SK%20-%20A%20Review%20of%20Process%20Technologies.pdf

Western Wind Energy Corp.

Western Wind Energy Corp.

Business History

Western Wind Energy Corp. has assembled an expert team for sourcing, acquiring and developing early-stage wind and solar properties. It is Western Wind's strategy to leverage this experience to aggressively grow the company. One of the main strategies of Western Wind's management is to access and acquire rare real estate that is suitable for wind and solar farming where the company can develop profitable wind and solar energy projects. By owning and controlling these properties and operating efficiently as a public company, Western Wind will be able to grow into a mid-size wind and solar developer and operator.

Western Wind is primarily focused on developing projects in California. This state is one of the most attractive markets for renewable energy projects because of the large size of the market and the 2010 Renewable Portfolio Standard. The 2010 Renewable Portfolio Standard is a legislation that requires California utilities to generate 20 percent of electricity from renewable sources by 2010. Subsequent recommendations in California energy policy reports advocated a goal of 33 percent by 2020.

Western Wind Energy is a vertically integrated renewable energy development and production company that currently owns over 500 wind turbines and a solar field, with 165 MW of rated capacity either in production or in construction, in the States of California and Arizona. Western Wind further owns substantial development assets for both solar and wind energy in the US, Canada, and in the Commonwealth of Puerto Rico. The Company is headquartered in Vancouver, BC and has branch offices in Scottsdale, Arizona and Tehachapi, California.

The Company owns and operates two wind energy generation facilities in California, and one fully integrated combined wind and solar energy generation facility in Arizona. The three operating wind generation facilities are comprised of the Windridge facility in Tehachapi, California with a 4.5 MW rated capacity, the Mesa Wind Power facility near Palm Springs, California with a 30 MW rated capacity, and the newly operational Kingman wind and solar facility in Kingman, Arizona with a combined 10.5 MW rated capacity. The Company is further developing wind and solar energy projects in California, Arizona, the Province of Ontario, and the Commonwealth of Puerto Rico.

Western Wind is in the business of developing, owning and operating wind and solar energy generating facilities. The Company employs nine full time consultants, six full time employees and six part-time consultants to develop new wind farms and solar projects and manage the Company. Management of Western Wind includes individuals involved in the operations and ownership of utility scale wind energy facilities in California since 1981.

Management Team

J. Michael Boyd	Chairman of the Board, Executive Vice President – Business Development
Jeffrey J. Ciachurski	Chief Executive Officer, Director
Keven Craig	Chief Financial Officer
Alana Steele	Chief Operating Officer, General Counsel
Steve Mendoza	Executive Vice President, Chief Engineer
Christopher R. Thompson	Senior Vice President – Project Finance
Rod Dees	Senior Vice President – Construction
Emily Lew	Financial Controller

Business Growth

Production

Main products – Electricity generation

Main Market – California electricity distributors; this is an emerging sector in the electricity generation market.  With the steady increase in demand and the decrease in cost for wind and solar electricity generation technology, this has become a feasible and profitable method of electricity generation. 

Supply and Demand of one product – There is an ever increasing demand for electricity in California, which currently uses 265,000 Gigawatt-hours of electricity per year and consumption is growing at a steady rate of two percent annually. In the last decade, between 29 percent and 42 percent of California’s in-state generation used natural gas.  Another 10 percent to 20 percent was provided by hydroelectric power that is subject to significant annual variations. Almost one-third of California’s entire in-state generation base is more than 40 years old. Fifteen percent to 30 percent of state wide electricity demand is served from sources outside state borders.  In the United States there is an estimated onshore wind resource potential of 10,400,000 MW with a current production of only 43,641 MW, leaving a huge market to expand into.

Stages of Production – Assessing suitable wind turbine farm locations; negotiating land lease agreements; negotiate project financing; negotiate purchase of turbines; build turbine sites and assemble turbines; negotiate Power Purchase Agreements with power distributors; commence production and feed into power grid.

Competition

Strongest Competitors – Brookfield Renewable Energy Partners L.P., Terra-Gen Power, LLC, G.E. Energy, NextEra Energy Resources

Competitive Advantage - One of the few early-stage wind companies currently generating revenue and cash flow, 2% annual growth in electricity demand in California

Summary

Western Wind Energy Corp. is at an early stage in the growing wind and solar electricity production market. With abundant incentives from US Federal tax credits for the development of wind and solar energy production and the high demand for electricity in California (their primary market), there is a tremendous potential for future profits.  The primary advantage that Western Wind enjoys over other wind power start ups is that they have established a source of revenue from producing generation sites to fund and to obtain additional financing for expansion.  The potential downside to this market is that the turbines are operated by a dozen private companies who sell their electricity to the local utility, Southern California Edison Co. Unlike an electric utility though, the wind companies are paid only for the electricity they generate. Southern California ratepayers assume none of the risk for installing, operating, or maintaining the turbines.  Permitting issues relate to the large tracts of land required to produce a relatively low concentration of electricity generation, erosion in desert areas, change in visual quality (affecting site lines at ridge lines), disturbance to wildlife habitats, avian mortality, noise pollution, and potential grass fires from sparks from damaged cables.  Overall, western wind has been able to enter an oligopolistic market, power generation through good planning and perseverance through the development and building process to take advantage of a reliable demand for their product.

Sources

Official Home Page

http://www.westernwindenergy.com/s/Home.asp

Wind Energy Production Statistics

http://www.awea.org/learnabout/industry_stats/index.cfm

Permitting Issues

http://www.energy.ca.gov/wind/overview.html

California’s Electricity Demand

http://www.cpuc.ca.gov/cfaqs/howhighiscaliforniaselectricitydemandandwheredoesthepowercomefrom.htm

Trends in Electricity Demand in California

http://enduse.lbl.gov/info/LBNL-47992.pdf

Windfarm Photo

http://www.presscom.com/windfarms.shtml